The profuse proliferation of poorly integrated projects suggests either – if we’re being charitable – a deliberate policy of experimenting with many different ideas, or else – if we’re not – the absence of a coherent strategy.
Clearly Nokia is aware of the secular tendency in all information technology fields that value migrates towards software and specifically towards applications. Equally clearly, they have the money, scale, and competence to deliver major projects in this field. However, so far they have failed to make services into a meaningful line of business, and even the well developed software ecosystem hasn’t seen a major hit like the iPhone and its associated app store.
Nokia Services: project proliferator
So far, the Services division in its various incarnations has brought forward Club Nokia, the Nokia Game, Forum Nokia, Symbian Developer Network, WidSets, Nokia Download!, MOSH, Nokia Comes With Music, Nokia Music Store, N-Gage, Ovi, Mail on Ovi, Contacts on Ovi, Ovi Store…it’s a lot of brands for one company, and that’s not even an exhaustive list. They’ve further acquired Intellisync, Sega.com, Loudeye, Twango, Enpocket, Oz Communications, Gate5, Starfish Software, Navteq and Avvenu since 2005 – that makes an average of just over two services acquisitions a year. Further, despite the decision to integrate all (or most) services into Ovi, there are still five different functional silos inside the Services division.
The great bulk of applications or services available or proposed for mobile devices fall into two categories – social or media. Under social we’re grouping anything that is primarily about communications; under media we’re grouping video, music, games, and content in general. Obviously there is a significant overlap. This is driven by fundamentals; no-one is likely to want to do computationally intensive graphics editing, CAD, or heavy data analysis on a mobile, run a database server on one, or play high-grade full-3D games. Batteries, CPU limitations, and most of all, form factor limitations see to that. And on the other side, communication is a fundamental human need, so there is demand pull as well as constraint push. As we pointed out back in the autumn of 2007, communication, not content, is king.
In trying to get user adoption of its applications and services, Nokia is pursuing two aims – one is to create products that will help to ship more Nokia devices, and to ship higher-value N- or E- series devices rather than featurephones, and the other is a longer-range hope to create a new business in its own right, which will probably be monetised through subscriptions, advertising,or transactions. This latter aim is much further off that the first, and is affected by the operators’ suspicion of any activity that seems to rival their treasured billing relationship. For example, although quick signup and data import are crucial to deploying a social application, Nokia probably wouldn’t get away with automatically enrolling all users in its services – the operators likely wouldn’t wear it.
There have been several historical examples of similar business models, in which sales of devices are driven by a social network. However, the common factor is that success has always come from facilitating existing social networks rather than trying to create new ones. This is also true of the networks themselves; if new ones emerge, it’s usually as an epi-phenomenon of generally reduced friction. Some examples:
- Telephony itself: nobody subscribed in order to join the telephone community, they subscribed to talk to the people they wanted to talk to anyway.
- GSM: the unique selling point was that the people who might want to talk to you could reach you anywhere, and PSTN interworking was crucial.
- RIM’s BlackBerry: early BlackBerries weren’t that impressive as such, but they provided access to the social value of your e-mail workflow and groupware anywhere. Remember, the only really valuable IM user base is the 17 million Lotus Notes Sametime users.
- 3’s INQ: the Global Mobile Award-winning handset is really a hardware representation of the user’s virtual presence . Hutchison isn’t interested in trying to make people join Club Hutch or use 3Book; they’re interested in helping their users manage their social networks and charging for the privilege.
So it’s unlikely that trying to recruit users into Nokia-specific communities is at all sensible. Nobody likes vendor lock-in. And, if your product is really good, why restrict it to Nokia hardware users? As far as Web applications go, of course, there’s absolutely no reason why other devices shouldn’t be allowed to play. But this fundamental issue – that no-one organises their lives around their friends’ or the friends’ mobile operators’ choices of device vendor – would tend to explain why there have been so many service launches, mergers, and shutdowns. Nokia is trying to find the answer by trial and error, but it’s looking in the wrong place. There is some evidence, however, that they are looking more at facilitating other social applications, but this is subject to negotiation with the operators.
The operator relationship – root of the problem
One of the reasons why is the conflict with operators mentioned above. Nokia’s efforts to build a Nokia-only community mirror the telco fascination with the billing relationship. Telcos tend to imagine that being a customer of Telco X is enough to constitute a substantial social and emotional link; Nokia is apparently working on the assumption that being a customer of Nokia is sufficient to make you more like other Nokia customers than everyone else. So both parties are trying to “own the customer”, when in fact this is probably pointless, and they are succeeding in spoiling each others’ plans. Although telcos like to imagine they have a unique relationship with their subscribers, they in fact know surprisingly little about them, and carriers tend to be very unpopular with the public. Who wants to have a relationship with the Big Expensive Phone Company anyway? Both parties need to rethink their approach to sociability.
What would a Telco 2.0 take on this look like?
First of all, the operator needs to realise that the subscribers don’t love them for themselves; it was the connectivity they were after all along! Tears! Secondly, Nokia needs to drop the fantasy of recruiting users into a vendor-specific Nokiasphere. It won’t work. Instead, both ought to be looking at how they can contribute to other people’s processes. If Nokia can come up with a better service offering, very well – let them use the telco API suite. In fact, perhaps the model should be flipped, and instead of telcos marketing Nokia devices as a bundled add-in with their service, Nokia ought to be marketing its devices (and services) with connectivity and much else bundled into the upfront price, with the telcos getting their share through richer wholesale mechanisms and platform services.
Consider the iPhone. Looking aside from the industrial design and GUI for a moment – I dare you! you can do it! – its key features were integration with iTunes (i.e. with content), a developer platform that offered good APIs and documentation, but also a route to market for the developers and an easy way for users to discover, buy, and install their products, and an internal business model that sweetened the deal for the operators, by offering them exclusivity and a share of the revenue. Everyone still loves the iPhone, everyone still hates AT&T, but would AT&T ever consider not renewing the contract with Apple? They’re stealing our customers’ hearts! Of course not.
Apple succeeded in improving the following processes for two out of three key customer groups:
- Users: Acquiring and managing music and video across multiple devices.
- Users: Discovering, installing, and sharing mobile applications
- Developers: Deploying and selling mobile applications
And as two-sidedness would suggest, they offered the remaining group a share of revenue. The rest is history; the iPhone has become the main driver of growth and profitability at Apple, more than one billion applications downloads have been shipped from the App Store, etc, etc.
Conclusions: turn to small business?
So far, however, Nokia’s approach has mirrored the worst aspects of telcos’ attitude to their subscribers; a combination of possessiveness and indifference. They want to own the customer; they don’t know how or why. It might be more defensible if there was any sign that Nokia is serious about making money from services; that, of course, is poison to the operators and is therefore permanently delayed. Similarly, Nokia would like to have the sort of brand loyalty Apple enjoys and to build the sort of integrated user experience Apple specialises in, but it is paranoid about the operators. The result is essentially an Apple strategy, but not quite.
What else could they try? Consider Nokia Life Tools, the package of information services for farmers and small businesses they are building for the developing world. One thing that Nokia’s services strategy has so far lacked is engagement with enterprises; it’s all been about swapping photos and music and status updates. Although Nokia makes great business-class gadgets, and they provide a lot of useful enablers (multiple e-mail boxes, support for different push e-mail systems, VPN clients, screen output, printer support), there’s a hole shaped like work in their services offering. RIM has been much better here, working together with IBM and Salesforce.com to expand the range of enterprise applications they can mobilise.
Life Tools, however, shows a possible opportunity – it’s all right catering to companies who already have complex workflow systems, but who’s serving the ones that don’t have the scale to invest there? None of the vendors are addressing this, and neither are the telcos. It fits a whole succession of Telco 2.0 principles – focus on enterprises, look for areas where there’s a big difference between the value of bits and their quantity, and work hard at improving wholesale.
It’s almost certainly a better idea than trying to be Apple, but not quite.
Next Steps for Nokia and telcos
It is unlikely that ”Nokia users” are a valid community
Really successful social hardware facilitates existing social networks
Nokia’s problems are significantly explained by their difficult relationship with operators
Nokia’s emerging-market Life Tools package might be more of an example than they think
A Telco 2.0 approach would emphasise small businesses, offer bundled connectivity, and deal with the operators through better wholesale